In recent times, unconditional or firm offers are the norm in a very competitive Canadian housing market. It is more critical than ever that the right mortgage pre approval steps are taken to minimize your purchase risk, while also ensuring your best mortgage deal, and long term enjoyment of your home.
With these pre approval steps completed, you’ll have developed a strong foundation and a clear picture – not only for yourself, but also for a mortgage lender. Your mortgage approval will be well organized and easy for the lender to navigate.
Read along to have more ideas on how to have the most reliable and most accurate mortgage pre-approval process in the real estate market.
- What kind of payment will you be most comfortable paying over time? Keep in mind other home ownership expenses too such as property taxes, utilities and potentially condo fees. It’s usually pretty exciting when buying a home and emotions can run high. So it’s important to try and determine ahead of time, what monthly mortgage payment you’ll be comfortable paying after you’re settled in.
- Have you recently checked your credit score? Checking your credit score online is easy and is crucial to determining your mortgage options. Once you have found the mortgage broker or Bank that you’d like to work with, it’s important that they formally pull your score to inspect it for accuracy, and to help ensure no last minute surprises. Ensuring every line of your credit report is properly inspected by an expert, is critical to a strong, reliable pre-approval.
- Get proof of income. Request a letter of employment to your work. Ensure your employment letter states your Start Date, Position, and Salary. You will need an employment letter for full approval, so why not get it sooner than later to avoid any potential issues or confusion later on? Most of the time, when there is a problem with a mortgage approval, it comes down to an issue or accidental miscommunication regarding income. So having your income well-documented upfront is excellent for a pre-approved mortgage. It will give you confidence that the mortgage approval process will proceed smoothly.
- Determine your down payment. As little as 5% will work and is also called ‘high ratio’ and is the lowest rate because the CMHC assumes all risk and the lender has little to no risk. The mortgage market is very risk-based, so as to risk changes with a down payment structure, so do rates. If you have other debts, consider less down payment (it can be as low as 5%) to pay off your debts. This is an excellent way to:
1. Boost a mortgage approval amount if desired
2. Save by not paying higher interest rate debt
3. Improve cash flow after closing.
- Talk to a mortgage professional. Get tips and mortgage options custom to your application.
Clients will often ask if it’s too soon to be setting up a pre approval, and the answer is ALWAYS that it’s never too early. For most mortgage brokers and Banks, consultations are free and have no obligation, so you have nothing to lose and much information and insight to gain.
An experienced mortgage broker or Banker will help by pulling together your credit, income and down payment information. A detailed up front review of this information as a mortgage pre approval lays the foundation of a fast and stress free full mortgage approval once your offer to purchase a home is accepted
Often opportunities will arise to improve the pre approved mortgage amount or rate options when pulling together the information.
Alternatively, there could be a mistake or snag that might prevent you from getting pre-approved for a mortgage. So ironing these details out sooner than later can be a major help.
- Rate Options. Compare and lower your rate with a good broker who will shop the market. With the right mortgage broker, determining the best rate options for you will be quick and easy.
Don’t settle for the first rate offered by your Bank branch.
Instead, learn and compare what rates are available for your application.
There is no one sized fits all rate. Rates will mainly differ based on:
- Credit score.
- Down payment amount as a % of the purchase price.
- Features in the mortgage fine print.
- Mortgage features. Find out what rate and mortgage type best fit for you. Does a fixed rate mortgage with predictable payments, or a variable rate mortgage that can change with the economy and market trends make sense for you?
Does a ‘no frills’, high penalty or limited feature mortgage at a lower rate make more sense? Or does a full feature mortgage at a *slightly* higher rate better sense for you?
With the right mortgage broker, determining the best rate options for you will be an educational, and money saving process.
- Request a pre-approval letter. This is a great tool to be used for making an offer to buy a home. When you make a formal offer to buy a home, including this letter with the offer package will help to add major strength relative to other offers. It will give you an advantage if there are multiple offers.
Request a strong mortgage pre approval letter explaining:
- What steps were reviewed as part of your pre approval process.
- Your mortgage pre approval amount.
- The lender or broker is confident in your approval.